S&P 500 Gains Despite Drop in Consumer Sentiment Amid Trade Deal Optimism
The S&P 500 moved higher on Friday, overcoming a surprise decline in consumer sentiment as investor confidence remained buoyed by progress in U.S.-China trade talks.
As of 3:03 p.m. ET (19:03 GMT), the Dow Jones Industrial Average climbed 313 points (0.6%), the S&P 500 rose by 0.6%, and the NASDAQ Composite advanced 0.4%.
For the week, the S&P 500 was up 4.5%, the Dow gained 2.6%, and the NASDAQ surged more than 6%. This rally follows the announcement of a 90-day trade truce between the U.S. and China, which eased investor fears about escalating global trade disputes and their impact on economic growth.
Consumer Sentiment Unexpectedly Slips
The University of Michigan’s preliminary consumer sentiment index for May came in at 50.8, down from 52.2 in April and well below the forecast of 53.4. Consumer sentiment has dropped nearly 30% since January 2025. Meanwhile, 1-year inflation expectations jumped to 7.3%, exceeding the 6.5% projection, while the 5-10 year outlook rose to 4.6%, above the expected 4.4%.
Although the April 2 tariff hikes have since been softened, economists expect to see their lingering effects in upcoming economic data. Morgan Stanley warned in a note that inflation is likely to accelerate from May, which could keep the Federal Reserve cautious about cutting interest rates this year.
Barclays Upgrades U.S. Growth Outlook
Following the latest developments in U.S.-China trade relations, Barclays revised its U.S. economic forecast. The bank now sees GDP growing 0.5% in 2025 and 1.6% in 2026, up from previous projections of -0.3% and 1.5%. The bank no longer expects a recession this year.
Despite the improved outlook, recent data showed weaker-than-expected retail sales and a drop in producer prices in April, reinforcing expectations for at least two rate cuts from the Fed this year.
Corporate Movers
- Applied Materials (NASDAQ: AMAT) declined after reporting lower-than-expected revenue in its core semiconductor systems division, which generated $5.26 billion, missing forecasts of $5.32 billion.
- Vistra Energy (NYSE: VST) rose after announcing a $1.9 billion acquisition of natural gas assets, tied to its efforts to power AI data centers.
- Take-Two Interactive (NASDAQ: TTWO) dropped following annual bookings guidance that fell short of expectations, partly due to delays in the release of Grand Theft Auto VI.
- Charter Communications (NASDAQ: CHTR) gained after it reached a $34.5 billion enterprise-value merger deal with Cox Communications, marking one of the industry’s largest combinations.
- Constellation Brands (NYSE: STZ) rallied as Berkshire Hathaway revealed it had doubled its stake in the beer maker, according to regulatory filings.
